Office and retail assets prove popular amid market volatility
Office and retail assets are proving resilient in a volatile economic environment with investors ploughing up to $49 billion into high-profile, higher-yielding bricks and mortar.
Mirvac and Blackstone are testing the demand with the listing of their co-owned office tower at 60 Margaret Street in Sydney and the accompanying retail complex known as the MetCentre, with a price tag of around $900 million.
Ray White head of research Vanessa Rader said the recorded sales volumes are higher than a year ago when the pandemic was in full force. Overseas investors remained interested in local assets as Australia is still seen as a safe haven for investment given its economic and political stability.
“The flows of capital are at a significant turning point, the big buyer of 2021, real estate investment trusts (REITs) are retreating rapidly this year selling more than they are buying,” Rader said in her investment update.
Ray White data shows that to the end of August, $48.6 billion has been invested in the commercial property sector with NSW the preferred location, accounting for 43.3 per cent of the sales, a rise of 5 per cent on last year’s results.
Victoria similarly has increased its holdings on 2021 results, now 27.8 per cent, while markets such as Queensland and Western Australia, which were attractive last year due to their strong population gains, economic growth, and future potential, have now slowed.
In Melbourne, Charter Hall led the charge with the purchase of a half share in the Southern Cross Towers complex, through its unlisted office trust for $1.02 billion on a yield of 4.35 per cent. Also, a 50 per cent stake in the $800 million, 555 Collins Street was sold to the Singaporean sovereign fund GIC.
“Looking at asset classes, the confidence in office assets has returned while industrial sales have now moderated after a standout 2021, while retail, hotels, and medical/aged care have all seen uplift in activity this year too,” Rader said.
Colliers head of capital markets Adam Woodward added that following a slower start to the year in the first half of 2022, investment activity over the third quarter, and “in particular September, has gathered pace”.
“Sales volumes totalling $3.392 billion across Australia’s CBD office markets were recorded over the quarter by the Colliers team,” Woodward said. That is more than double the transaction volumes over the same period last year and brings 2022 year-to-date to $8.694 billion.
He said major transactions including Allendale Square in Perth, which Centuria Capital Group and MA Financial Group jointly bought for $223 million, demonstrated that demand remained strong for prime assets in core locations, reinforcing the flight-to-quality theme playing out in the office market.
The increased focus on environment, sustainability and governance (ESG) is also expected to drive further “bifurcation between the values for Premium/A-grade and secondary grade assets”.
